News Release

News Release

Contacts:

Integra LifeSciences Holdings Corporation

     
John B. Henneman, III
  Investor Relations:
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
(609) 275-0500
jack.henneman@integralife.com
  Angela Steinway


(609) 936-2268
angela.steinway@integralife.com
 
   

Integra LifeSciences Reports First Quarter 2011 Financial Results

Revenues for the first quarter increased to $181 million

Plainsboro, New Jersey, April 28, 2011 – Integra LifeSciences Holdings Corporation (NASDAQ: IART) today reported its financial results for the first quarter ending March 31, 2011. Total revenues for the first quarter were $181.0 million, reflecting an increase of $8.3 million, or 5%, over the first quarter of 2010. Excluding the impact of currency exchange rates, revenues increased 4.4% over the first quarter of 2010. We present revenues by product category in a table at the end of this press release.

“In the first quarter, we achieved another period of solid results in a challenging environment. We expect that our growth-driving investments will propel our business forward, including faster revenue growth in the second half of 2011,” said Stuart Essig, Integra’s Chief Executive Officer.

The Company reported GAAP net income of $11.5 million, or $0.38 per diluted share, for the first quarter of 2011, compared to GAAP net income of $15.2 million, or $0.50 per diluted share, for the first quarter of 2010.

Adjusted net income for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $20.0 million, or $0.66 per diluted share, compared to $19.0 million, or $0.63 per diluted share, in the first quarter of 2010.

Integra generated $21.3 million in cash flows from operations and used $5.9 million of cash on capital expenditures in the first quarter of 2011. During the quarter, Integra used $40 million of cash to pay down its revolving line of credit.

Adjusted EBITDA for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $36.6 million, an increase of 8% compared to the first quarter last year.

Adjusted EBITDA excluding stock-based compensation for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $40.7 million, also an increase of 8% compared to the first quarter last year.

Outlook for 2011

The Company is reiterating its revenue and earnings per share guidance for the full year 2011. The Company anticipates revenues between $765 million and $780 million. The Company is guiding to GAAP earnings per diluted share of between $1.97 and $2.12 and to adjusted earnings per diluted share of between $2.87 and $3.02. In accordance with our usual practice, expectations for financial performance do not include the impact of acquisitions or other strategic corporate transactions that have not yet closed.

In the future, the Company may record, or expects to record, certain additional revenues, gains, expenses or charges as described in the Discussion of Adjusted Financial measures below that it will exclude in the calculation of adjusted EBITDA and adjusted earnings per share for historical periods and in providing adjusted earnings per share guidance.

Conference Call

Integra has scheduled a conference call for 8:30 AM ET on Thursday, April 28, 2011 to discuss financial results for the first quarter and forward-looking financial guidance. The conference call will be hosted by Integra’s senior management team and will be open to all listeners. Additional forward-looking information may be discussed in a question and answer session following the call.

Access to the live call is available by dialing 719-325-2138 and using the passcode 8305582. The call can also be accessed through a webcast via a link provided on the Investor Relations homepage of Integra’s website at www.integralife.com. Access to the replay is available through May 12, 2011 by dialing 719-457-0820 and using the passcode 8305582. The webcast will also be archived on the website.

***

Integra LifeSciences, a world leader in medical devices, is dedicated to limiting uncertainty for surgeons, so they can concentrate on providing the best patient care. Integra offers innovative solutions in orthopedics, neurosurgery, spine, reconstructive and general surgery. For more information, please visit www.integralife.com.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and reflect the Company’s judgment as of the date of this release. Forward-looking statements include, but are not limited to, statements concerning future financial performance, including projections for revenues, GAAP and adjusted net income, GAAP and adjusted earnings per diluted share, non-GAAP adjustments such as system implementations charges, acquisition-related charges, non-cash amortization of imputed interest for convertible debt, intangible asset amortization, and income tax expense (benefit) related to non-GAAP adjustments. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted or expected results. Such risks and uncertainties include, but are not limited to: the Company’s ability to maintain relationships with customers of acquired entities; physicians’ willingness to adopt and third-party payors’ willingness to provide reimbursement for the Company’s recently launched and planned products; the Company’s ability to manufacture sufficient quantities of its products to meet its customers’ demand; initiatives launched by the Company’s competitors; the Company’s ability to secure regulatory approval for products in development; fluctuations in hospital spending for capital equipment; the Company’s ability to comply with and obtain approvals for products of human origin and comply with recently enacted regulations regarding products containing materials derived from animal sources; difficulties in controlling expenses, including costs to procure and manufacture our products; the impact of changes in management or staff levels; the Company’s ability to integrate acquired businesses; the Company’s ability to leverage its existing selling organizations and administrative infrastructure; the Company’s ability to increase product sales and gross margins, and control non-product costs; the amount and timing of acquisition and integration related costs; the geographic distribution of where the Company generates its taxable income; the effect of legislation effecting healthcare reform in the United States; fluctuations in foreign currency exchange rates; the amount of our convertible notes and bank borrowings outstanding, and the economic, competitive, governmental, technological and other risk factors and uncertainties identified under the heading “Risk Factors” included in Item 1A of Integra’s Annual Report on Form 10-K for the year ended December 31, 2010 and information contained in subsequent filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Discussion of Adjusted Financial Measures

In addition to our GAAP results, we provide adjusted revenues, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consist of growth in total revenues excluding the effects of currency exchange rates on the current period’s revenues. The various measures of adjusted EBITDA consist of GAAP net income, excluding: (i) depreciation and amortization, (ii) other income (expense), net, (iii) interest income and expense, (iv) income taxes, (v) those operating expenses also excluded from adjusted net income and, as appropriate (vi) stock-based compensation expense. The measure of adjusted net income consists of GAAP net income, excluding: (i) acquisition-related charges; (ii) certain employee termination and related charges; (iii) intangible asset impairment charges; (iv) charges associated with discontinued or withdrawn product lines; (v) systems implementation charges; (vi) facility consolidation, manufacturing and distribution transfer charges; (vii) charges related to restructuring European entities; (viii) expenses related to our Chief Operating Officer joining the Company; (ix) non-cash amortization of imputed interest for convertible debt; (x) intangible asset amortization expense; and (xi) income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate. The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. Reconciliations of GAAP revenues to adjusted revenues for the quarter ended March 31, 2011 and GAAP net income to adjusted EBITDA, adjusted EBITDA excluding stock-based compensation and adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share for the quarters ended March 31, 2011 and 2010 appear in the financial tables in this release.

Integra believes that the presentation of adjusted revenues and the various adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. For further information regarding why Integra believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company’s Current Report on Form 8-K regarding this earnings press release filed today with the Securities and Exchange Commission. This Current Report on Form 8-K is available on the SEC’s website at www.sec.gov or on our website at www.integralife.com.

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(In thousands, except per share amounts)

                 
    Three Months Ended
    March 31,
    2011   2010
Total revenues
  $ 181,041     $ 172,698  
Costs and expenses:
               
Cost of product revenues
    64,921       63,224  
Research and development
    12,153       11,301  
Selling, general and administrative
    80,084       72,511  
Intangible asset amortization
    3,011       3,019  
 
               
Total costs and expenses
    160,169       150,055  
Operating income
    20,872       22,643  
Interest income
    73       61  
Interest expense
    (5,469 )     (4,541 )
Other income (expense), net
    (643 )     1,146  
 
               
Income before income taxes
    14,833       19,309  
Income tax expense
    3,346       4,087  
 
               
Net income
    11,487       15,222  
Diluted net income per share *
  $ 0.38     $ 0.50  
 
               
Weighted average common shares
               
outstanding for diluted net
               
income per share
    30,185       29,982  

*   In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company’s unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (less than $0.01 per share) on diluted net income per share for all periods shown above.

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Listed below are the items included in GAAP revenues and GAAP net income that management excludes in computing the adjusted financial measures referred to in the text of this press release and further described under Discussion of Adjusted Financial Measures.

Growth in total revenues excluding the effects of currency exchange rates

(In thousands)

                         
    Three Months Ended
    March 31,
    2011   2010   Change
Orthopedics
  $ 72,234     $ 70,187       3 %
Neurosurgery
  $ 68,358     $ 64,774       6 %
Instruments
  $ 40,449     $ 37,737       7 %
 
                       
Total revenues
  $ 181,041     $ 172,698       5 %
Impact of changes in
                       
currency exchange rates
  $ (772 )              
 
                       
Total revenues excluding
                       
the effects of currency
                       
exchange rates
  $ 180,269     $ 172,698       4 %
 
                       

3

Items included in GAAP net income and location where each item is recorded

(In thousands)

Three Months Ended March 31, 2011

                                                                 
Item   Total Amount   COPR(a)   R&D(b)   SG&A(c)   Amort.(d)   Interest Exp(Inc)(e)   Other Exp(Inc)(f)   Tax(g)
Acquisition-related charges
  $ 942   $ 285   $ 300   $ 357        
Certain employee termination and related charges
  34   34            
Intangible asset impairment charges
  248   97       151      
Charges associated with discontinued or withdrawn product lines
  100   100            
Systems implementation charges
  2,655       2,655        
Facility consolidation, manufacturing and distribution transfer charges
  1,822   919     903        
Charges related to restructuring European entities
  262       262        
Non-cash amortization of imputed interest for convertible debt
  1,634           1,634    
Intangible asset amortization expense*
  4,242   1,382       2,860      
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate
  (3,414 )               (3,414 )
Depreciation expense
  5,468                                                        
Stock-based compensation expense
  4,034                                                        

*For the period ending March 31, 2011, “Intangible asset amortization expense” excludes $248 already included in “Intangible asset impairment charges” above.

      a)

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COPR – Cost of product revenues

  b)   R&D – Research and development

  c)   SG&A – Selling, general and administrative

  d)   Amort. – Intangible asset amortization

  e)   Interest Inc(Exp) – Interest income (expense), net

  f)   Other Inc(Exp) – Other income (expense), net

  g)   Tax – Income tax expense

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Three Months Ended March 31, 2010

                                                                 
Item   Total Amount   COPR   R&D   SG&A   Amort.   Interest Exp(Inc)   Other Exp(Inc)   Tax
Acquisition-related charges
  $ 555   $ 406   $ 28   $ 121        
Certain employee termination and related charges
  628       628        
Charges associated with discontinued or withdrawn product lines
  74   74            
Systems implementation charges
  136       136        
Facility consolidation, manufacturing and distribution transfer charges
  326   256   26   44        
Non-cash amortization of imputed interest for convertible debt
  2,053           2,053    
Intangible asset amortization expense
  4,482   1,463       3,019      
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate
  (4,458 )               (4,458 )
Depreciation expense
  4,949                                                        
Stock-based compensation expense
  3,843                                                        

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO ADJUSTED EBITDA AND ADJUSTED EBITDA
EXCLUDING STOCK BASED COMPENSATION
(UNAUDITED)

(In thousands)

                 
    Three Months Ended
    March 31,
    2011   2010
GAAP net income
  $ 11,487     $ 15,222  
Non-GAAP adjustments:
               
Depreciation and intangible asset amortization
               
expense
    9,710       9,431  
Other (income) expense, net
    643       (1,146 )
Interest (income) expense, net
    5,396       4,480  
Income tax expense
    3,346       4,087  
Acquisition-related charges
    942       555  
Certain employee termination and related
               
charges
    34       628  
Intangible asset impairment charges
    248        
Charges associated with discontinued or withdrawn
               
product lines
    100       74  
Systems implementation charges
    2,655       136  
Facility consolidation, manufacturing and
               
distribution transfer charges
    1,822       326  
Charges related to restructuring European entities
    262        
 
               
Total of non-GAAP adjustments
    25,158       18,571  
 
               
Adjusted EBITDA
  $ 36,645     $ 33,793  
Stock-based compensation
    4,034       3,843  
 
               
Adjusted EBITDA excluding stock-based compensation
  $ 40,679     $ 37,636  

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO MEASURES OF ADJUSTED NET INCOME AND
ADJUSTED EARNINGS PER SHARE
(UNAUDITED)

(In thousands, except per share amounts)

                 
    Three Months Ended
    March 31,
    2011   2010
GAAP net income
  $ 11,487     $ 15,222  
Non-GAAP adjustments:
               
Acquisition-related charges
    942       555  
Certain employee termination and related
               
charges
    34       628  
Intangible asset impairment charges
    248        
Charges associated with discontinued or withdrawn
               
product lines
    100       74  
Systems implementation charges
    2,655       136  
Facility consolidation, manufacturing and
               
distribution transfer charges
    1,822       326  
Charges related to restructuring
               
European entities
    262        
Non-cash amortization of imputed interest
               
for convertible debt
    1,634       2,053  
Intangible asset amortization expense
    4,242       4,482  
Income tax expense related to
               
above adjustments, quarterly adjustments to
               
income tax expense related to the
               
cumulative impact of changes in estimated tax
               
rates and certain infrequently occurring items
               
that affected the reported tax rate
    (3,414 )     (4,458 )
 
               
Total of non-GAAP adjustments
    8,525       3,796  
 
               
Adjusted net income
  $ 20,012     $ 19,018  
Adjusted diluted net income per share *
  $ 0.66     $ 0.63  
 
               
Weighted average common shares outstanding for
               
diluted net income per share
    30,185       29,982  

*   In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company’s unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (less than $0.01 per share) on adjusted diluted net income per share for all periods shown above.

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED BALANCE SHEET DATA
(UNAUDITED)

(In thousands)

                 
    March 31,   December 31,
    2011   2010
Cash and cash equivalents
  $ 104,354     $ 128,763  
Accounts receivable, net
    106,117       106,005  
Inventory, net
    154,601       146,928  
Term loan
    146,250       148,126  
Bank line of credit
    60,000       100,000  
Convertible securities
    156,824       155,154  
Stockholders’ equity
    527,586       499,963  

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GUIDANCE

(In thousands, except per share amounts)

                                 
 
  Recorded Year to   Projected Year Ended
 
  Date                        
 
  March 31, 2011   December 31, 2011
             
 
          Low   High
                     
GAAP net income
  $ 11,487     $ 59,708             $ 64,208  
Non-GAAP adjustments:
                               
Acquisition-related charges     942       3,240     3,240
Certain employee termination and related charges
    34       34       34          
Intangible asset impairment charges     248       248     248
Charges associated with discontinued or withdrawn
                               
product lines     100       100     100
Systems implementation charges     2,655       13,000     13,000
Facility consolidation, manufacturing
                               
and distribution transfer charges     1,822       2,190     2,190
Charges related to restructuring European entities     262       720     720
Expenses related to our Chief Operating
                               
Officer joining the Company     -       200     200
Non-cash amortization of imputed interest
                               
for convertible debt
                               
      1,634       6,710     6,710
Intangible asset amortization expense     4,242       16,950     16,950
Income tax expense related
                               
to above adjustments and certain
                               
infrequently occurring items     (3,414 )     (16,100 )   (16,100)
                     
Total of non-GAAP adjustments
    8,525       27,292               27,292  
 
                               
Adjusted net income
  $ 20,012     $ 87,000             $ 91,500  
GAAP diluted net income per share
  $ 0.38     $ 1.97             $ 2.12  
Non-GAAP adjustments detailed above
                               
(per share)
  $ 0.28     $ 0.90             $ 0.90  
                     
Adjusted diluted net income per share
  $ 0.66     $ 2.87             $ 3.02  
                     
Weighted average common shares
                               
outstanding for diluted net
                               
income per share
    30,185       30,300               30,300  

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Items included in GAAP net income guidance and location where each item is expected to be recorded

(In thousands)

Projected Year Ended December 31, 2011

                                                                 
Item   Total Amount   COPR   R&D   SG&A   Amort.   Interest Exp(Inc)   Other Exp(Inc)   Tax
Acquisition-related charges
  $ 3,240   $ 780   $ 300   $ 2,160        
Certain employee termination and related charges
  34   34            
Intangible asset impairment charges
  248   97       151      
Charges associated with discontinued or withdrawn product lines
  100   100            
Systems implementation charges
  13,000       13,000        
Facility consolidation, manufacturing and distribution transfer charges
  2,190   1,120     1,070        
Charges related to restructuring European entities
  720       720        
Expenses related to our Chief Operating Officer joining the Company
  200       200        
Non-cash amortization of imputed interest for convertible debt
  6,710           6,710    
Intangible asset amortization expense
  16,950   5,980       10,970      
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate
  (16,100 )               (16,100 )

Source: Integra LifeSciences Holdings Corporation

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